Outward FDI and income inequality in the home country: The role of wage bargaining

Sajid Anwar and Sizhong Sun

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: In the process of economic globalization, firms extending operations via Foreign Direct Investment (FDI) encounter significant effects on wage inequality. Workers with bargaining power can negotiate favorable terms, while those without this influence face pronounced disparities. Building on the framework of Helpman et al. (2010), this study examines the impact of non-bargaining workers on income inequality during the transition from autarky to outward FDI. The results highlight a marked increase in wage gaps, particularly with greater outward FDI intensity. Moreover, under certain conditions, there is a notable rise in overall inequality, as measured by the Theil index.

Keywords: Outward FDI; Wage income inequality; Globalization; Wage bargaining (search for similar items in EconPapers)
JEL-codes: D31 F23 F60 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003296

DOI: 10.1016/j.iref.2025.104166

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